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Inter-Industry Wage Differentials: An Increasingly Important Contributor to Urban China Income Inequality

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  • Zhao Chen
  • Ming Lu
  • Guanghua Wan

Abstract

How significantly inter-industry wage differentials contribute to rising income inequality is an essential policy issue for transitional economies. Using regression-based inequality decomposition, this paper finds that inter-industrial wage differentials contributed increasingly to income inequality in urban China through 1988, 1995, and 2002, mainly due to rapid income growth in monopolistic industries. Factors such as region, education, ownership, occupation, and holding a second job also contribute increasingly to income inequality, while being employed the whole year and age have decreasing contributions. If China seeks to reduce urban income inequality, removing entry barriers in the labor market and breaking monopoly power in the goods market are essential policy prescriptions.

Suggested Citation

  • Zhao Chen & Ming Lu & Guanghua Wan, 2010. "Inter-Industry Wage Differentials: An Increasingly Important Contributor to Urban China Income Inequality," Global COE Hi-Stat Discussion Paper Series gd09-130, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hst:ghsdps:gd09-130
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    File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd09-130.pdf
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    References listed on IDEAS

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    Cited by:

    1. Vizer, David, 2011. "Behind the North-South divide: A decomposition analysis," MPRA Paper 28364, University Library of Munich, Germany.
    2. Ming LU & Hong GAO, 2011. "Labour market transition, income inequality and economic growth in China," International Labour Review, International Labour Organization, vol. 150(1-2), pages 101-126, June.
    3. Mehta, Aashish & Sun, Wei, 2013. "Does Industry Affiliation Influence Wages? Evidence from Indonesia and the Asian Financial Crisis," World Development, Elsevier, vol. 51(C), pages 47-61.
    4. Iris Claus & Les Oxley & Chen Wang & Guanghua Wan & Dan Yang, 2014. "Income Inequality In The People'S Republic Of China: Trends, Determinants, And Proposed Remedies," Journal of Economic Surveys, Wiley Blackwell, vol. 28(4), pages 686-708, September.
    5. Zhao, Da & Wu, Tianhao & He, Qiwei, 2017. "Consumption inequality and its evolution in urban China," China Economic Review, Elsevier, vol. 46(C), pages 208-228.
    6. Zhao Chen & Ming Lu & Hiroshi Sato, 2009. "Social Networks and Labor Market Entry Barriers: Understanding Inter-industrial Wage Differentials in Urban China," Global COE Hi-Stat Discussion Paper Series gd09-084, Institute of Economic Research, Hitotsubashi University.
    7. Kwon, Ohyun & Fleisher, Belton M. & Deng, Quheng, 2011. "Evolution of the Industrial Wage Structure in China Since 1980," IZA Discussion Papers 5880, Institute of Labor Economics (IZA).

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    Keywords

    Inter-industry wage differntials; Income ineqality; Regression-based decomposition;
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